During its deliberations on the price fixing mechanism for liquefied petroleum gas (LPG), some members of the National Assembly's Public Accounts Committee singled out one private sector production company, Jamshoro Joint Venture Limited (JJVL), for harsh criticism.
They alleged that JJVL used LPG quotas to shower favours on influential people to strengthen its control over the sector. And furthermore, that the company enjoyed monopoly in the market and was doing business on its own terms. Indeed, the list of JJVL's allocation holders makes an impressive reading of who is who of this country's ruling elite.
However, the criticism on this basis is not entirely fair. For, JJVL is one hundred percent a private company. What it does with its product is its business, as long as in doing so, it does not violate the law. It cannot be questioned for offering profitable business propositions to people who happen to be influential though that may not be an exactly virtuous practice.
The link between LPG allocations and influential individuals goes back a long time. The sector was deregulated in 2000. Before that, both the Nawaz Sharif and Benazir governments as also the Ziaul Haq regime, routinely used LPG quotas to favour their political supporters, sympathisers and influentials. It is an improvement of sorts if a private company is distributing largesse to a select group of people at its own expense.
JJVL is the largest LPG producer, but it is wrong to say that it has monopoly over the sector. It has nine other public as well as private sector competitors. In fact, only last month, the Competition Commission of Pakistan (CCP) slapped JJVL with a fine of Rs 278 million - around four percent of its profits - on charges of encouraging cartelization in the LPG sector.
Given these details, the Public Accounts Committee seems to have let political considerations override an objective assessment of the situation. So far as the pricing issue is concerned, the Committee had a genuine cause for concern, especially after it was informed that per kg production cost of LPG is only Rs 9 and its retail price Rs 72. Even if the figures involve some exaggeration, the production companies easily stand accused of excessive profiteering.
Two obvious reasons are to blame for it. One is governmental indifference. For a long time, it kept looking the other way as the sector moved towards cartelization, which leads to arbitrary price-fixing. Second, there has been no price regulatory mechanism in place.
The Chairman of the Oil and Gas Regulatory Authority (Ogra) conceded as much before the Committee, saying that under the existing rules, the Authority had no provision to check pricing in the LPG sector. The CCP has already taken due notice of the cartelization issue. A proactive regulatory authority is clearly in order.
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